Citizenship Question Battle Over, Time to Pivot to a Complete Count
Last week the President formally conceded that the census form would not contain the controversial citizenship question, ending a contentious, 17-month legal battle. As National Council of Nonprofits’ President and CEO Tim Delaney wrote in Nonprofit Quarterly after the Supreme Court blocked inclusion of the question, “The Supreme Court’s correct result in this landmark case, however, only provides the opportunity for a fair, accurate, and complete count. It does not guarantee
it.” The article, What the US Supreme Court Citizenship Case Means for Nonprofits, identifies both how and why nonprofits can take actions to help make sure the 2020 census count in their communities is as fair, accurate, and complete as possible. It’s not just nonprofits saying it’s time to throw extra energy into making sure that everyone is counted. In an op-ed in the New York Times, three Governors from Western states stressed that it’s time to focus on the
actual count: “just because the citizenship question will not be included doesn’t mean an end to the confusion or anxiety.” Therefore, they pledged that “regardless of what happens at the federal level, we will make sure the people in our states are counted.”
It’s Showtime for Federal Budget Decisions
The news last week that the federal government may default on its debts much sooner than expected may have the positive effect of forcing congressional leaders and the President to reach agreement on borrowing, spending, and perhaps tax policy issues. The Treasury Secretary warned Friday that the federal government may "run out of cash in early September, before Congress reconvenes" from its summer recess. That means leaders have only the next two weeks (eight legislative days) to agree on a new, higher debt ceiling so the U.S. can borrow to pay its bills and avert a federal government
shutdown. It also presents lawmakers with the opportunity to strike a deal on preventing automatic spending cuts of more than $100 billion to defense and domestic programs. A spending agreement for the 2020 fiscal year that starts October 1 could enable Congress to pass appropriations bills and avoid having to rely on a short-term continuing resolution that merely delays making hard decisions. Finally, the need to pass legislation by the start of the summer recess on August 2 also raises the possibility that priorities of the nonprofit community could be addressed, such as including repeal of the tax on nonprofit transportation benefits, so it could be enacted before the next quarterly tax payment comes due. Nonprofits can help make the
case for repeal of this tax by taking the quick survey.
- Raising the Minimum Wage: The U.S. House of Representatives is scheduled this week to take up the Raise the Wage Act (HR 582), which would increase the federal minimum wage to $15 per hour in six annual increments. According to a Congressional Budget Office report, more than doubling the federal minimum wage to $15 per hour would increase wages for 17 million workers, but could cost 1.3 million jobs when fully implemented by 2025. Currently, 29 states and Washington, DC, have higher minimum wages, as reflected in this map.
- Declining Charitable Deductions: Itemized charitable deductions fell by $54 billion this past year, according to MarketWatch, although the data in the report cannot be read to mean total charitable giving dropped that precipitously. Rick Cohen, Chief Operating Officer for the National Council of Nonprofits commented on the report: “Just because someone isn’t itemizing anymore doesn’t mean they aren’t still giving.” Cohen went on to state, “Most of the people who are no longer itemizing are (hopefully) still giving, but studies show that they
may not give as much.” While the actual dollar-amount cannot be measured as accurately as in the past, the IRS still captures how many people itemize. The most recent data show that only 11 million taxpayers have claimed itemized deductions in 2018 for charitable contributions compared to 31 million taxpayers in 2017.
- Promoting Disaster Tax Relief: Nonprofits would receive some benefits for disaster relief efforts under a newly introduced bill by Rep. Tom Rice (R-SC). The Tax Relief and Expedited Assistance for Disasters Act of 2019 (TREAD Act) would temporarily suspend certain limitations on charitable contributions and allow for an automatic extension for certain tax filings, among other things. Last month the state association members of the National Council of Nonprofits submitted
recommendations to the Senate Finance Committee taskforce on disaster tax relief, and made four specific recommendations, including the creation of a temporary, targeted universal or non-itemizer charitable deduction to provide a giving incentive to people throughout the country, regardless of tax-filing status.
- Fighting for Student Loan Forgiveness: The American Federation of Teachers (AFT) is suing Secretary of Education Betsy DeVos for denying thousands of eligible candidates relief under the Public Service Loan Forgiveness (PSLF) program. Recent data show that less than one percent of borrowers submitting applications under the PSLF program – just 518 individuals – successfully received loan forgiveness. More than 75,000 applicants were rejected. The U.S.
Department of Education has tried to justify the denial by claiming that borrowers did not meet the eligibility requirements of the program and the problems are embedded in the complex federal law. AFT denounced the DOE’s approach, calling it a “deliberate sabotage of a bipartisan government initiative,” and asks for restoration of the program to legal
standards, as well as institution of an appeals process for those who believe they have been wrongfully denied loan forgiveness.
- Taxing Education Endowments: The Internal Revenue Service has finally released proposed regulations for determining how much in excise taxes a few dozen colleges and universities must pay under a provision enacted as part of the 2017 tax law. "The guidance clarifies how to determine net investment income, including how to include the net investment income of related organizations and how to determine an institution's basis in property," according to the IRS
press release. The tax, which was modeled on the private foundation excise tax, imposes a 1.4 percent levy on net investment income of nonprofit colleges and universities with assets of at least $500,000 per full-time student and more than 500 full-time students. See the analysis by the National Association of College and University Business Officers for more information. The deadline for public comment is October 1.
Making the Call for Cosponsors
Influential Members of Congress are asking their fellow Representatives to help nonprofits by joining in legislative efforts to fix new and longstanding tax problems that undermine nonprofit missions. In a new Dear Colleague letter, House Majority Whip Jim Clyburn (D-SC) and Representative Carolyn Maloney are urging members to cosponsor two bills that directly affect nonprofit bottom lines. Whip Clyburn’s bill, the Stop the Tax Hike on Charities and Places of Worship Act (H.R. 1223) would repeal the 21 percent unrelated business income tax on expenses nonprofits incur providing employee transportation benefits, such as transit subsidies and parking. The bill sponsored by Representative Maloney, who serves as Vice Chair of the Joint Economic Committee in Congress, is the Nonprofit Relief Act of 2019 (H.R. 3323). The legislation would repeal the new tax that requires nonprofits to treat every unrelated business revenue stream
as a separate “trade or business” that may not be aggregated with their other profits and losses in calculating tax liabilities. The bill also would extend the paid leave tax credit available to for-profit businesses to tax-exempt organizations and change the tax treatment of mileage reimbursements to volunteers, so they are no longer subject to federal and state income taxes. Both bills would be paid for by increasing the corporate tax rate by less than one-tenth of one percent. The National Council of Nonprofits strongly supports the substance of the two bills and calls on nonprofits to alert their Representatives to this cosponsorship opportunity.
Most Legislative Sessions End, Budget Crises Emerge
July 1 marked the beginning of fiscal years for most states, but seven states passed the deadline without full-year budgets. The Governors in New Hampshire and North Carolina vetoed the budgets passed by their Legislatures, and Wisconsin’s Governor issued 78 line-item vetoes to the budget presented to him. Elsewhere, Rhode Island Governor Raimondo delayed action, but eventually signed the $9.9 billion budget. Some states have temporary appropriation bills, so at least they have funding to continue operating.
State finances in Alaska are experiencing the greatest crisis in that state’s history. The Legislature failed to override more than $440 million in line-item cuts made by the Governor, meaning that funds have been eliminated for, among other programs: Head Start; arts programs; Medicaid dental coverage; student scholarships; and electrical subsidies and ferry services will be curtailed. Facing cuts in state funding of 40 percent, the University of
Alaska’s president is expected today to ask the board of regents to declare a financial exigency, or academic bankruptcy, enabling him to lay off as many at 2,000 employees, including tenured faculty. In an article entitled, “Have Courage,” Laurie Wolf of The Foraker Group, the state association of nonprofits in Alaska, issued encouragement to nonprofits bracing for the spending cuts. “There will be harm and unimaginable grief from the lack of an override … but know
that the fight is not over.” Wolf stressed, “The Legislature still has options and there will be action to take in the coming days and weeks.” Learn more about the budget challenges to nonprofits in Alaska by reading Wolf’s testimony before the Legislature last week.
Moody’s Investor Service responded to the budget impasses in the various states by issuing a devastating critique of governance, calling out the seven states and warning of late payments to local governments and nonprofits. “[L]ate budgets are sign of governance weakness which, in extreme cases, can be negative for state credit qualified,” according to the national credit-rating agency.
The Stress of Funding State Pensions
There is a $1 trillion gap between the pension promises states have made to their employees and the amount in state pension funds. This mammoth underfunding influences how lawmakers approach all other spending and tax policies affecting not just residents but also the nonprofits in their states. According to new research from The Pew Charitable Trusts, just eight states had funded their public pension plans at a level of at least 90 percent, while 24 states had plans funded at less than 70 percent. The 20 states with the lowest-funded pension plans saw the financial position of their systems decline
steadily from being funded at three-fourths (76 percent) of their obligations in 2007 to just over half (56 percent) in 2017. Kentucky, Illinois, and New Jersey have the worst-funded retirement systems in the nation, according to the Pew analysis, which reports that these states consistently contributed less each year than required. Conversely, South Dakota, Tennessee, and Wisconsin – the three states with the best-funded pension plans in 2017 – are notable for making 100 percent of the contributions that actuaries recommended.
The report from Pew recognizes, “Ongoing declines in pension funding levels increase the pressure on state and local budgets as the cost of pension debt rises.” Kentucky, which has the lowest pension funding rate at 33.9 percent, has struggled for years to address the challenge. A few years ago, a blue-ribbon panel recommended numerous tax and spending changes to generate money to put into the funds, including capping charitable and other itemized deductions. The Kentucky Legislature may convene in special session this month to address the pension challenges.
Taxes, Fees, PILOTs
- Stormwater Fees: The Jamestown, North Dakota City Council is considering a new stormwater fee to be applied to all properties, including property owned by nonprofits, churches, parks, and governments. The City itself would be expected to pay $3,150 per month under the proposed plan. The new fee would be assessed based on the size of the commercial property and $3 per month for residential. The ordinance creating the stormwater utility fee program passed unanimously on July 1, but the resolution adopting the fee structure has yet to be adopted.
- Property Tax: A Maryland court held that a local health care campus failed to show that all of its property served a charitable purpose and determined some property tax exemptions did not qualify. The local supervisor of assessments had determined that a property with a for-profit dialysis center, memory care unit, and assisted living facilities were not eligible for the tax exemption, but long-term nursing care, rehabilitative services unit, and adult day care units qualified for exemptions because of the amount of Medicaid patients treated. An appeals court upheld the
Opening Up About Decent Working Conditions
This is an article about bringing greater dignity to work, embracing and expanding justice, promoting sustainability. And Unicorns.
Our Canadian colleagues, led by the Ontario Nonprofit Network and others, have developed the concept of “decent work” that encourages organizations to think about work “as a central source of personal dignity, family stability, community cohesion, civic inclusion, economic vibrancy, and societal well-being." It recognizes that while many charitable nonprofits have missions dedicated to providing employment services, alleviating poverty, and promoting community health and well-being, not enough attention is paid to the sector’s role as an employer in promoting these same goals. The bottom-line concept of the movement from the Canadian perspective, as explained in a recent report, is that “a sector that champions decent work — both at a community level and through investing in its employees — will have an increased ability to make community impacts due to better engagement and effectiveness from its workers.”
The good people at the Hawai`i Alliance of Nonprofit Organizations (HANO) knew that conversations about “decent work” were urgently needed in their communities. The trick for them was how to get thousands of individuals spread out over the eight islands of the Aloha State to want to engage on these need-to-discuss topics. Their answer was to tap the culture and the tradition of sharing aloha amongst friends, family, and the relationships around them. They have turned to the tradition of respect and honor for spending time together – the coming together to “talk story” –
that gives all the opportunity to share in the past and plan for the future.
But with a twist. HANO is sharing that history with a bit of levity and magic, inviting “nonprofit unicorns” to join them at their Talk Story + Listening Sessions on Decent Work. They entice the unicorns with free admission and food (reportedly the best way to any magical unicorn’s heart). Once there, attendees are encouraged to discuss issues ranging from salaries and benefits to diverse, equitable, and inclusive work opportunities and workplaces. They ask and answer the critical issues they face:
what’s in place to support Decent Work conditions, what’s needed to improve workplace practices and policies, and how the sector can champion Decent Work practices and policies.
HANO also expanded the discussion topics to include other pressing matters, such as questions of nonprofit sustainability, understanding and communicating the true cost of doing business and creating quality outcomes, as well as confronting issues of succession and the talent pipeline.
While the issues are broad, certain common threads have emerged at the different sessions: the need for more honest conversations between funders and grantees, the need to more effectively gather and share data that demonstrates the impact of the sector, and the need to find creative ways to support professional development and mentoring across the sector. Throughout the series, HANO has been compiling a Decent Work “Library” with articles and resources, as well as cultivating a Decent Work Facebook group that attendees are invited to join after their session.
If nothing else, the sessions prove that when people – and unicorns – come together to talk story, the past, present, and future can be a bit more magical.
Read more examples of Advocacy in Action,
a regular feature of Nonprofit Advocacy Matters.